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Premcor Inc.

 


Address:
8182 Maryland Avenue, Suite 600
St. Louis, Missouri 63105
U.S.A.

Telephone: (314) 854-9696
Fax: (314) 854-1580
http://www.premcorinc.com

Statistics:
Private Company
Incorporated: 1932 as Clark Oil & Refining Corporation
Employees: 2,000
Sales: $4 billion (2000 est.)
NAIC: 32411 Petroleum Refining


Company Perspectives:


We are Premcor employees dedicated to providing quality refined oil products and services. Our mission is to maximize the investment return for our shareholders and provide value to our customers. We are committed to safe and responsible operations that protect our work environment and the communities in which we operate.


Key Dates:


1932: Emory Clark buys first gas station in Milwaukee.
1981: Clark sold to Apex.
1987: Clark and Apex enter Chapter 11.
1988: Clark bought by Horsham Corp.
1999: Clark sheds retail unit, sells Clark brand name.
2000: Company changes name to Premcor.


Company History:

Premcor Inc. is one of the United States' leading privately owned oil refiners. It operates four refineries, which primarily produce gasoline and diesel fuel. Its largest refinery is in Port Arthur, Texas, a historic facility that began operating in 1901 following the first discovery of oil in Texas. This facility produces jet fuel as well as diesel and gasoline and is one of the most technologically advanced refineries in the world. Premcor also owns a refinery in Lima, Ohio, which produces nearly a quarter of the gasoline bought in that state. Of its two Illinois refineries, one is located in Hartford, Illinois, just across the Mississippi from Premcor's St. Louis headquarters, and the other is in a suburb of Chicago, Blue Island. Combined capacity at Premcor's four refineries is 547,000 barrels per day. The company purchases crude oil for its refineries from petroleum producers worldwide. It has no oil production capacity itself. Premcor began as Clark Oil, a leading refiner and marketer of gasoline. It sold its product at thousands of Clark gas stations in the Midwest and bordering states. Premcor sold all of its retail business and the Clark brand name in 1999 and is no longer affiliated with Clark gas stations and stores. The company changed its name in 2000 to reflect its severance with Clark. Premcor is now owned by two major groups of shareholders. The largest stake is held by affiliates of the Blackstone Group, a New York City-based investment bank. The second largest stake is owned by Occidental Petroleum. Premcor operates four subsidiary companies. Port Arthur Coker Company L.P. and Port Arthur Finance Corp. are also affiliated with Occidental. Premcor's other major subsidiaries are Premcor USA Inc. and The Premcor Refining Group Inc.

Early History

Premcor Inc. began its life as a gasoline refiner and marketer named for its founder, Emory T. Clark. Clark moved from his native Georgia to Milwaukee, Wisconsin, and worked in the construction business. During the Depression, it was hard for Clark to find enough construction work to get along. So in 1932 he made an investment of $14 and took over a one-pump gas station in Milwaukee at the corner of 60th and Greenfield Streets. Clark named the station Clark's Super Gas and began investing in more stations in the area. Clark built his brand around premium gasoline. Clark stations sold premium gas exclusively and did not offer some of the other services, such as tire changing and engine repairs and maintenance, available at competitors' stations. The idea behind Clark was that the customer could drive up, get filled with the best gas, and drive away in a hurry.

Clark Oil built up its market through Wisconsin, Illinois, and surrounding Midwestern states. In 1943, the company began refining oil, taking over a refinery at Blue Island, Illinois. The Blue Island refinery was connected by pipeline with automated terminals, and it could also ship its finished product via water using the Cal-Sag canal and the Great Lakes. This was convenient to markets throughout the Midwest. By the mid-1950s, the company operated close to 500 gas stations, located in Ohio, Indiana, Michigan, Illinois, Wisconsin, Minnesota, Iowa, and Missouri. In 1957 the company broadened its scope further, moving from marketing and refining into oil exploration and production. In 1964 Clark opened a plant to produce petrochemicals and began selling acetone and phenol.

By the late 1960s, Clark Oil & Refining was one of the most profitable oil enterprises around. It stuck to its marketing formula of providing only high-octane premium gas and not offering any repair services. Its stations were built primarily at high-traffic intersections or highway off-ramps and boasted speedy, efficient service. Its refinery at Blue Island was able to produce a higher proportion of premium gas than almost any other in the industry. The company was publicly traded on the New York Stock Exchange.

Clark's growth in the 1960s was impressive. Its revenues tripled between 1959 and 1969, while its profits went up by a factor of six. Sales surpassed $200 million for the first time in 1968, and Clark continued to add gas stations. It acquired a chain of 117 Owens Oil stations in 1969, and it began building up its Ohio market as well as moving beyond the Midwest into bordering states.

Changes in the 1970s

By 1970, Clark operated 1,489 stations, and its two refineries, the one at Blue Island and a second at Woods River, Illinois, acquired in 1968, were refining almost 100,000 barrels a day combined. The Milwaukee-based company was the largest independent oil refiner and marketer in the Midwest, and one of the most successful in this competitive market. The average amount of gallons sold per Clark station was twice the national average, and its emphasis on premium gasoline gave it a high profit margin. Emory Clark stepped down as president of Clark Oil & Refining in 1970, although he stayed on as chairman and was the firm's principal stockholder. Leadership of the company passed to Owen Hill, a former accountant.

The oil industry began to go through significant changes in the 1970s. Clark was forced to give up selling only premium-grade gasoline when pollution concerns brought about the industrywide conversion to unleaded gas. It began selling unleaded gas in 1974. Clark's oil exploration had not gone well, and it continued to buy its crude on the open market. The OPEC oil embargo of 1973--74 led to increased crude oil costs for Clark. In the 1970s Clark's profitability often was determined by complex regulations governing the crude oil market.

In the late 1970s, the company embarked on a plan to make its marketing operations more efficient. The plan was carried out under the auspices of Clark's new chairman and CEO Robert G. Reed III. Emory Clark, who retained almost a quarter of the firm's stock, was still chairman of the company's executive committee. Reed began by assessing the profitability of each of the company's nearly 2,000 stations. Over the next two years, almost 400 were closed down. He also reorganized the firm into a less complex corporate structure. While it shut some stations, Clark began building so-called Superstations, which were larger format stations, and began converting most of its stations to self-service. It also began adding 'grocerettes' to some of its stations, offering 24-hour fast food. In 1981 Clark spent $15 million on a marketing push that converted stations in ten major metropolitan markets to a more competitive format. The company began competing on price, shedding its old image of the purveyor of high-priced premium gas. Clark hired an executive who had worked for 7-11 and Stop-N-Go, the convenience store chains, to head a new division of convenience store operations. The company seemed to be moving aggressively to get the most out of its retail empire as the costs associated with its refinery operations grew more uncertain.

Under Apex in the 1980s

In early 1980, Emory T. Clark had briefly floated the idea that Clark Oil might be for sale. The company's stock went up, and then down, as Clark announced that acquisition talks with an unnamed suitor had broken down. Later that year, a St. Louis-based company called Apex Oil began buying up Clark stock. Clark's chairman, Robert Reed III, initially wrote Apex a letter asking it to cease. The company was not for sale. But by the middle of 1981, Clark Oil had accepted an offer from Apex to buy out the Clark family for $37 a share. Apex shelled out more than $483 million for the family's shares and prepared to invest another $100 million for other outstanding shares. By August 1981, the publicly traded Clark Oil had become a subsidiary of Apex, a privately held and mysteriously closed-mouth conglomerate run by two men, Samuel R. Goldstein and P.A. 'Tony' Novelly. At the time of the sale, Clark had revenues of $1.6 billion. The relatively unknown Apex had gross sales of $6.25 billion. To buy Clark, Apex got a consortium of 12 banks to put together a $740 million line of credit.

Apex was founded in the 1930s by Charles Mintz. It began as a small company that stored oil at a terminal near St. Louis on the Mississippi. Samuel Goldstein, Mintz's son-in-law, entered the business in the 1940s. Goldstein bought out his family's shares in the 1960s and began buying up more oil storage space. During the oil shortage caused by the embargo of 1973, Apex profited handsomely on the oil it had in storage, and the company began to grow exponentially.

Goldstein took on Tony Novelly around that time. Novelly seems to have had an explosive personality, and the quick rise of Apex was usually attributed to his drive and acumen. Apex began the 1970s with revenues of about $10 million. By 1980, the company had become a behemoth, with revenue of $6.25 billion, which soon leapt to $10 billion with the addition of Clark Oil. It owned 25 sea-going tankers and 38 barges, had two million barrels of storage space, plus more than 11 million more that it leased, many subsidiary companies in the oil business, as well as a real estate subsidiary and ownership of a Colorado ski resort. Apex was one of the nation's biggest oil traders, and it made gargantuan deals in oil futures, though not always successfully. In 1982 Apex lost $32 million selling oil futures. Soon after Apex acquired Clark, oil prices began to fall, and Apex had trouble getting credit. Short of cash, Apex decided to sell Clark. By 1985, Apex had hired Merrill Lynch & Co. to negotiate a sale, but the company then rejected the offers it received as too low. In 1986, Apex again lost badly in the oil futures market, eventually throwing away $96 million. Declining oil prices meant that the oil in Apex's inventory was worth less. The efforts to keep Apex afloat were generally attributed to Tony Novelly, but he apparently had trouble keeping his temper when arranging matters with Apex's bank. In one meeting he was said to have stormed out after calling the banks 'stupid.' When a sale of Clark to Getty Petroleum was arranged in 1987, Novelly again stomped out of the meeting room after finding that the stock he was getting in the deal was to be nonvoting. Novelly quickly set up another deal for Clark, this time with a Chicago financier named Samuel Zell, but this also fell through. In December 1987, Apex's banks called in the company's loans. Apex declared bankruptcy, and Clark also went Chapter 11. At the time, it was one of the largest bankruptcy petitions ever for a privately held company.

The 1990s and Beyond

Clark Oil & Refining was then bought by a unit of Horsham Corp., a Toronto investment firm. Horsham offered $454 million for 60 percent of Clark, the revenues of which had risen to $3.5 billion under Apex and then fallen to around $2 billion at the time of the bankruptcy. Clark's assets included its two Illinois refineries and about 1,000 gas stations. Horsham eventually acquired 100 percent of Clark in 1992. The company changed its name to Clark Refining and Marketing in 1993. It was still run out of St. Louis.

In the early 1990s, Clark invested in its remaining gas stations, now clustered in eight Midwestern states. It seemed to pick up where it had left off before the acquisition by Apex, remodeling old stations, expanding its convenience store offerings, and stepping up its investments in key competitive markets such as Chicago. Under Horsham Clark also updated its logo, changing the colors for a more 1990s look. Clark invested some $300 million in its two refineries, updating equipment and redesigning to conform to new environmental regulations.

In the mid-1990s, Clark began expanding through acquisition. The company purchased its Port Arthur, Texas refinery from Chevron in 1995, and then in 1998 bought a refinery in Lima, Ohio from BP Oil. The two acquisitions quadrupled the company's refining capacity. Meanwhile, ownership of the company changed. Horsham Corp. had changed its name to TrizecHahn. This company sold 80 percent of its stake in Clark to a New York-based investment company, the Blackstone Group. Occidental Petroleum acquired another large stake. Clark had been working on its retail marketing, selling off gas stations in some territories and trying to step up its presence in others through the late 1990s. In 1999, Clark Refining and Marketing announced that it would sell all of its retail operations, and remain only in the refining business. Clark's remaining 700 gas stations and 200 convenience stores were sold in December 1999, along with the Clark brand name. These were then operated by a company that took the name Clark Retail Enterprises Inc. Clark also sold its product distribution terminals in 1999. The company was pared down to running only its four refineries. It changed its name to Premcor in 2000, a name that was put together from 'premier' plus 'corporation.' Premcor stood as the fifth largest independent oil refiner in the United States, and the eleventh largest overall. The company planned to concentrate exclusively on its refinery business in the future, making significant investments in upgrading and expanding its existing facilities.

Principal Subsidiaries: Premcor Refining Group, Inc.; Port Arthur Coker Company L.P.; Port Arthur Finance Corp.; Premcor USA Inc.

Principal Competitors: BP Amoco plc; Ultramar Diamond Shamrock.





Further Reading:


Bailey, Jeff, 'Apex Oil Prevents Massive Liquidation with Filing for Chapter 11 Protection,' Wall Street Journal, December 29, 1987, p. 4.
'Clark Oil--On the Move,' Financial World, November 26, 1969, p. 7.
Dwyer, Steve, 'Back on Course, Clark Pushes Retail Expansion, Station Upgrades,' National Petroleum News, October 1991, p. 14.
Geary, Cornelius, 'Retail Revival,' National Petroleum News, July 1981, pp. 51--53.
'Horsham Agrees to Buy Remaining 40% Stake of Its Clark Oil Unit,' Wall Street Journal, December 15, 1992, p. A6.
Kovski, Alan, 'Clark Oil & Refining Announces Plan to Sell Operations in Kansas, Kentucky, Minnesota,' Oil Daily, January 20, 1993, p. 2.
------, 'Clark Pursues Independent Marketers to Spread Brand in Competitive Midwest,' Oil Daily, February 12, 1997, p. 3.
Lamphier, Gary, 'Court Approves Sale of Clark Oil to Horsham Unit,' Wall Street Journal, November 8, 1988, p. C15.
'Missing Leg,' Forbes, June 1, 1973, pp. 22--23.
Moore, Rob, 'Clark to Spend $300 Million on Refineries,' St. Louis Business Journal, October 28, 1991, p. 1A.
'Over a Barrel,' Forbes, February 1, 1971, pp. 18--19.
Sandler, Linda, 'Peter Munk Bets Horsham Corp. Can Match the Success of American Barrick Resources,' Wall Street Journal, April 17, 1989, p. C2.
Shaner, Richard, 'Apex Oil: Midwest's Mystery Giant Casts Bold Shadow in Buying Spree,' National Petroleum News, October 1981, pp. 76--79.
Sherrid, Pamela, 'Don't Squeeze This Bear, He Will Sue,' Forbes, May 24, 1982, pp. 58--59.
'Specialist Diversifies,' Financial World, June 19, 1968, pp. 56.
Wall, Wendy, 'How a Bold Executive Made Apex Oil Grow, and How It Collapsed,' National Petroleum News, April 1988, p. 49.

Source: International Directory of Company Histories, Vol. 37. St. James Press, 2001.




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